One of the most important aspects of trading is to “keep learning”.

The minute we start to think that we know what we’re doing – the markets will usually turn around and bite us on the backside. Even after all the years I’ve been trading the markets never cease to surprise me, and there are always new trading techniques that I could be using to improve my returns…

5 Simple trading techniques to give you the edge

1. Use a proven trading system

A trading plan is essential if you want to succeed. It will keep you in control; it’ll help you manage your emotions; it’ll allow you to monitor your progress; and manage your finances.

Whether it’s a trading strategy that you’ve paid for, or one that you’ve developed yourself, it needs clear, logical rules that include position size, risk management, stop loss levels and profit limits.

Don’t chop and change your trading plan according to short-term results –remember this is a long game. Monitor your success rate, and review your progress at regular intervals.

2. Avoid thin markets

Sitting at your computer all day, banging away at your trading strategy, through thick and thin, is unlikely to be the smartest – or the most profitable – way to trade.

Sure, many markets are 24 hour, which means that there’s always something going on. But you might be wise to trade less – but trade more effectively.

For example, the trading strategy I follow has been producing steady returns for me on Cable. But, when I analyse my best trading times, I’m getting the lion’s share of returns before 9am, and then for the rest of the day profits are significantly harder to come by.

So now I’m trialing a switch to equities for the later morning … some commodities in the afternoon …

The plan is to pin-point the best times to trade a particular strategy on any given instrument – that way I can boost returns, and avoid wasting my time, staring at my screen, waiting for the action to kick in.

3. Don’t try to reinvent the wheel

There are plenty of tried and tested trading indicators that have been used successfully for years. Just because someone is bragging about their amazing new trading signal, doesn’t mean that you should drop everything.

Many of the most successful traders I know use the simplest of trading signals. You don’t need to overload your charts with technical indicators – the way in which you use your indicator and manage your positions is more important.

So, keep your trading signals simple – but be smart about your trade management.

4. Beware your demo account

The only way to get really good at trading is to practise. And a demo account can be a great way to find your way around the markets… to get a feel for new strategies… and to learn the nuances of different instruments…

However, many traders view their demo accounts as playgrounds.

Demos can give false confidence and lead to bad habits and impulsive trading. Also, demo accounts do not have the same price feed as live accounts, so a trading system that’s working on a demo account, might not work on the subtly different live account.

Only by trading on a live account will you know how you’ll really react when you’re in a winning position or in a losing position. Many trading platforms allow you to start off with very small stakes, so you can start live trading without taking big risks.

5. Protect your money

The single best way to succeed in trading is to protect your money. If you don’t do this – you won’t be trading for very long.

You should protect the money that you bring to the table… the money that’s on the table in open trades… and the money that you make at the table…

Let’s look at each of these in turn:

To protect your trading fund, you should never risk more than 2% on any single trade. That means that a losing run shouldn’t shake your progress too much – and being able to live to trade another day is the way to stay in the game.

But what about protecting the money on the table?

The main way to protect the money in an open trade is to use a stop loss, and not to widen that stop loss to avoid taking a losing trade.

But you can also consider tightening up your stop loss as your trade moves into positive territory – you could use a trailing stop, or manage your trades as they happen. Another advantage of moving your stops up is that you’re less likely to be tempted to close out early, but will let your profits run.

Now, once you’ve banked those nice profits – the last thing you want to do is give them back to the markets. Which is why you need to protect those gains. If you’re reinvesting your winnings, your fund should be slowly growing, and your stake sizes increasing (assuming that you’re sticking to a 2% rule, or similar).

Consider moving a percentage of your profits from your trading fund each year to protect your profits.